Banks made a series of 14 donations to the UK Independence Party (UKIP) in 2014/15 totalling £976,781.38. The IHT liability arises from the lifetime rate of 20% applied to the amount of the donation which exceeded Banks’ unused nil rate band (then £325,000).
Donations made to political parties can be exempt from IHT if the section 24 IHTA 1984 conditions are satisfied. Section 24 states that an exemption applies if at the last general election preceding the transfer of value:
two members of that party were elected to the House of Commons, or
one member of that party was elected to the House of Commons and not less than 150,000 votes were given to candidates who were members of that party.
HMRC argued the two MPs were not elected at the last general election, so the section 24 exemption did not apply and IHT was payable.
UKIP did have two MPs at the time of the donations, but they had both been elected at by-elections, not at the previous general election. Hence when Banks made the donations, UKIP did not qualify as a political party for the IHT relief.
FTT and UT decisions
Banks appealed HMRC’s decision to the first tier tax tribunal and then subsequently the upper tribunal on the grounds that the IHT Act was discriminatory under article 14 of the European Convention on Human Rights (ECHR) and breached his and UKIP’s human rights (freedom of expression article 10 and freedom of assembly article 11).
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